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Capital Expenditures :
Another approach to deciding on capital expenditure investments is to assign a priority to each
investment proposed. We tend to limit the priority scale to values, as follows.
1. Absolute Must. Includes security, legal, regulatory, end-of-life equipment; typically externally
mandated, that is, you really have little or no choice. Simply stated, if you are under very tight
capital expenditure and/or expense budget constraints, the cutoff is drawn here.
2. Highly Desired/Business-Critical. Includes short-term "break even" (less than six months),
significant short-term "return to top or bottom line" less than months), and mega projects
already in progress.
3. Wanted. Valuable, with a longer return term (more than 12 months). Typically, these
projects get funded only if there is capital money remaining, if resources are available, and if
revenue projections are fairly secured.
4. Nice to Have. Given available bandwidth in people and money, there is a good return on
these projects, but typically the ROI has more intangibles. Unlikely to be funded in this budget
year; might go up the priority list in subsequent budget years. It is important to have some
projects in this priority, as it helps to better calibrate the higher priorities.
The following items constitute what is most typically referred to as "the budget." The major
categories of budget expenses are:
Salaries and benefits (including hiring fees and bonuses)
Training and education
Staff-related depreciation
Temporary help/consultants
Miscellaneous (space, telecom, and so on)
Customer support
Leased lines
Oursourced network services
Security services
Applications service providers (ASPs)
Miscellaneous (transport, courier, periodicals, and so on)
Q1) Explain the needs of Capital Expenditure investment. (10 Marks).
Q2) Give any two difference between hardware and software. (10 Marks).

Q1) Explain the needs of Capital Expenditure investment. (10 Marks).
'Capital Expenditure - CAPEX'
Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory
The amount of capital expenditures a company is likely to have depends on the industry it occupies. Some of the most capital intensive industries include oil, telecom and utilities.

In terms of accounting, an expense is considered to be a capital expenditure when the asset is a newly purchased capital asset or an investment that improves the useful life of an existing capital asset. If an expense is a capital expenditure, it needs to be capitalized; this requires the company to spread the cost of the expenditure over the useful life of the asset. If, however, the expense is one that maintains the asset at its current condition, the cost is deducted fully in the year of the expense.
A capital expenditure is an outlay of cash to acquire or upgrade a business asset. Common examples of a capital expenditure include the purchase of a new building, or the cost of significant upgrades to an existing facility. A capital expenditure is considered to be deductible, because it represents an improvement to the business, and it is deducted over the expected life of the item, rather than all at once as in the case of repair or maintenance expenditures.
A capital expenditure is also sometimes referred to as capital spending or a capital expense, and many publicly traded companies list their capital expenditures for the year in annual reports, so that stockholders can see how the company is using their money in long term planning. Most companies engage in capital expenditures yearly, in an attempt to constantly upgrade and improve facilities, vehicles, and equipment.
Sometimes it can be difficult to determine the difference between a capital expenditure and a routine expense. In general, if the expenditure improves the value of the asset, it is a capital expenditure, while if it simply keeps the asset in working condition, it is a routine expense. For example, installation of a new bathroom in a rental is a capital expenditure, because it increases the value of the rental. Repairing the stove, however, is a routine expense designed to keep the rental in operating condition.
Engaging in capital expenditure is a routine way to improve and expand a business, whether done on small or large scale. Large corporations may acquire additional companies, as in the case of an automotive giant which purchases another car manufacturer, while smaller businesses may consider the purchase of a new office printer to be a capital expenditure. In general, allowances are made in the budget of the company for capital expenditures, including unexpected ones involving the replacement of items which are no longer able to be repaired.
A capital expenditure is amortized over the length of the life of the investment, which may range from an expectation of five to 40 years, depending on the investment. This time period is known as a recovery period, and recovery periods for major assets are set out so that companies will know how to deduct capital expenditures. The amortization means that the company cannot deduct the cost of the capital expenditure all at once, and must instead spread it out over the life of the investment. For example, someone who installs a 25,000 US Dollars (USD) fence which has a five year recovery period may deduct 5,000 USD each year for five years.
Capital Expenditures and Other Cash Needs for a Business
A key element of the budgeting process for a business is to prepare a capital expenditures budget that goes to top management for review and approval. A business has to take a hard look at its long-term operating assets in particular, the capacity, condition, and efficiency of these resources and decide whether it needs to expand and modernize its property, plant, and equipment.
In most cases, a business needs to invest substantial sums of money in purchasing new fixed assets or retrofitting and upgrading its old fixed assets. These long-term investments require major cash outlays. So, each division of a business prepares a formal list of the fixed assets to be purchased, constructed, and upgraded.
The money for these major outlays comes from the central treasury of the business. Accordingly, the overall capital expenditures budget goes to the highest levels in the organization for review and final approval. The chief financial officer, the CEO, and the board of directors of the business go over a capital expenditure budget request with a fine-toothed comb (or at least they should).
At the company-wide level, the financial officers merge the profit and cash flow budgets of all profit centers and cost centers of the business. (A cost center is an organizational unit that does not generate revenue, such as the legal and accounting departments.) The budgets submitted by one or more of the divisions may be returned for revision before final approval is given.
One main concern is whether the collective cash flow total from all the units provides enough money for the capital expenditures that will be made during the coming year and to meet the other demands for cash, such as for cash distributions from profit. The business may have to raise more capital from debt or equity sources during the coming year to close the gap between cash flow from operating activities and its needs for cash
Q2) Give any two difference between hardware and software. (10 Marks).

All physical contents of computer are hardware. This form is given to all electrical and mechanical devices attached to the computer for the purpose of input, process, and storage and output operations.
1.Primary Hardware: is the CPU and its other units i.e. circuits and IC's.
2.Secondary Harware: is the memory or storage area of computer.
Software is a general term used for computer Programs. A computer program is a planned, step by step set of instructions that directs the computer what to do and how to do. It turns the data into information - that makes a computer useful.
Types Of Software
Generally speaking, software can be categorized as: (1) System Software (2) Application Software
1.System Software
The programs directly related to the computer hardware and perform tasks associated with controlling and utilizing computer hardware are known as system software.System software does not solve a specific problem for the user rather it helps to solva a problem.
System software falls into following categories.
(i) Operating System
Operating systems are the most important system software. Operating system is a set of programs that control and supervises the hardware of a computer and provides services to application software, programmers and users of computer.Without operating system a computer cannot do anything useful. A user cannot communicate directly with the computer hardware, so the operating system acts as an intermediary between user of a computer and the computer hardware. The primary goal of an operating system is to make the computer convenient to use. The secondary goal is to use the computer efficiently.
Some important tasks of an operating system are managing the resources of the computer such as Central Processing Unit (CPU), memory, disk drives and printer and running user programs. Every type of computer has its own operating system. Operating system for mainframe and other large computers are very complex since they must keep track of several programs from several users all running in the same time frame.
Following are some of the popular operating systems used in personal computers: DOS, Windows, Unix, Linus, Solaris, etc.
(ii) Language Translators
The computer does not understand a programming language, because computer only know the machine language or binary language. A program must be translated into machine language before the machine can execute it.
Software associated with programming languages include language translators such as assemblers, interpreters and compilers.
(a) Interpreter
An interpreter translates and executes each program statement one at a time. After execution the translation of a statement is removed from memory and next statement is loaded for translation. Translation is required if program is executed again. Therefore interpreter has limitations that it forgets translation after execution of statement. Interpreters are suitable for short programs developed by beginners to programming.
GWBASIC is an interpreter for BASIC language programs. Each programming language has its own interpreter.
(b) Compiler
Compilers translate the whole program at a time and store their translated program on disk. The original program is called "Source Program" while its translated version is called "Object Program".
(c) Assembler
The assembler is a language translator for a low level programming language called "Assembly language". Assembly language is a Symbolic language.
(iii) Data-management software
Data-management software includes database and file management programs that manage data for an operating system. They can organize, update and print data.
(iv) Editors
Editors allow the user to type-in a program, generate text and make modifications whenever necessary. A program is first written in an editor and then is compiled. It is possible that the compiler of any language has its own editor for writing programs.
(v) Utility Software
These are programs that users can purchase as seperate products to perform a wide range of functions. The programs for these functions are PC-Tools, Scan Disk, Norton Disk Doctor (NDD), Anti virus and some of the utilities that are mostly bundled with the operating system.
An application is a job or task a user wants to accomplish through a computer. Application software are programs that help a user perform a specific job.

For example application software enables a user to write a letter and/ or create a drawing. It helps the user work faster, more efficiently and thus provide more productivity than manual performance.
Types of Application software
Application software can be grouped into two broad categories.
(i) General purpose Application software
(ii) Special purpose Application Software
General Purpose Application Software
These are called package software or commercial software. A single software can be applied to a wide variety of tasks. By using such software a user can fulfill his or her general needs.

General purpose software includes, MS Office, Corel Draw, Page maker, Adobe Photo shop, etc.
(ii) Special Purpose Application Software
The software that is designed to perform a specific task is known as special purpose application software. This i also called Custom software. The Software can perform only one task for which it has been designed. Custom software for the tasks of a large organization may be extremely complex and takes a lot of time to develop.
For example, Software to process inventory control, software to maintain Bank Accounts, Software used in Airline Booking System, etc.

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Leo Lingham


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18 years working managerial experience covering business planning, strategic planning, corporate planning, management service, organization development, marketing, sales management etc


24 years in management consulting which includes business planning, strategic planning, marketing , product management,
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